Journal of Finance 2026
Can Small Businesses Survive Chapter 11?
Abstract
A majority of small U.S. businesses attempting to reorganize in bankruptcy fail to do so. Subchapter V of Chapter 11 (SubV) streamlines bankruptcy for small firms by reducing bankruptcy costs and negotiation frictions, and enables entrepreneurs to retain ownership. We show that many businesses reorganize under SubV that otherwise would liquidate. Creditor recoveries and postbankruptcy survival rates are at least as high in SubV as in traditional Chapter 11s. Our results show the increase in reorganizations is not associated with continuation of unviable firms, and that creditors are not harmed by a shift in bargaining power toward small business owners.
- DOI
- 10.1111/jofi.70076
- Language
- en
- Sources
- crossref